An Overview and Comparison of Aviation and Space Insurance

Abstract

Commercial aviation and commercial space operations entail significant risk. The very nature of these operations means a mishap can result in significant financial losses. Insurance enables operators to reduce the magnitude of their exposure in a predictable and reliable way; and likely increases the willingness of businesses to participate in these industries. Insurance coverage also provides assurances that financial resources exist to cover any third-party liability claims resulting from accidents. For these reasons, the acquisition of insurance by industry participants can be desirable as a matter of public policy. This paper examines the availability of insurance coverage for commercial aviation and commercial space operations, including a comparison of the types of risks covered and typical policy terms. The paper additionally surveys what, if any, national laws mandate that operators acquire coverage. Research reveals that aviation insurance products remain readily available and much price competition exists. The low cost and availability of aviation insurance means air carriers are likely to obtain insurance coverage independent of explicit legislative mandates to do so. Space insurance costs, however, comprise the third largest space program cost, representing 10% of the overall cost. Spacecraft operators demonstrate a willingness to forgo insurance as a risk reduction strategy. National laws requiring insurance in the space industry are few and are primarily focused on indemnification of the state’s liabilities under international treaties